Supply Chain
US Suspends Trade Privileges with Bangladesh, Pressuring Factories, Brands to Comply with Safety Standards

On Thursday, the Obama Administration announced that it would be suspending trade privileges extended to Bangladesh as a result of the country's neglect of workers' rights.

"I have determined that it is appropriate to suspend Bangladesh's designation … because it is not taking steps to afford internationally recognized worker rights to workers in the country," President Obama wrote in a message to Congress. The decision, regarded widely as a stern warning to the nation, will effectively end special tax breaks on exports to the US that are meant to help developing economies.

The decision was partially motivated by April's Rana Plaza building collapse, which killed over 1,100 garment factory workers as well as the Tazreen factory fire in late 2012 that killed over 100 workers.

Labor unions and politicians have been pressuring the President to take action as the US continued to receive duty-free exports from the nation, which has built up an $18 billion garment industry, 25 percent of which is exported to the US.

“It’s only symbolic. It’s not very much money,” said Institute for Global Labor and Human Rights executive director Charles Kernaghan, MSNBC reports. “But someone had to put the line down and say 'enough is enough.' ” In fact, the duty-free GSP privileges don't apply to garments, which are already highly taxed. "Bangladesh factories cranking out plastic bags, golf equipment and tobacco products are more likely to be affected than those stitching together skinny jeans for H&M and Gap," notes Businessweek.

The administration said that the local Bangladeshi government and garment organizations have been moving too slowly to implement newly required workers' unions and safety regulations, essentially forcing its hand to suspend the export privileges. "Given the deteriorating conditions for worker rights in Bangladesh, President Obama's decision to suspend GSP trade benefits for Bangladesh is an appropriate and welcome step," said Rep. George Miller, D-Calif. "Bangladesh must assure acceptable conditions at work, by enforcing its building and fire safety codes. It must afford workers the right to refuse to work in unsafe buildings, threatened by fire or collapse, without fear of blacklisting or loss of a paycheck."

The hope is that Obama’s sanction will influence the European Union, which is weighing a similar option to also suspend Bangladesh’s trade preferences despite the fact that Europe purchases 60 percent of the country’s garment exports — a move that would likely cripple the booming industry and one that may reflect poorly on already-suffering workers. Ironically, while the country's relationship with such big players as the US and Europe becomes more rocky, it seems that Bangladesh is already looking towards other prospects, especially those with India, perhaps to prepare for a future with less Western investment.

AFL-CIO President Richard Trumka said the decision sends an important message to foreign countries that manufacture goods for American consumers. "Countries that benefit from preferential trade programs must comply with their terms. Countries that tolerate dangerous—and even deadly—working conditions and deny basic workers' rights, especially the right to freedom of association, will risk losing preferential access to the US market."

The decision not only places pressure on Bangladesh, but also on the handful of American retailers that failed to sign the Accord on Bangladesh Fire and Building Safety, including Walmart, Gap, Sears, Target and several others. Citing too-stringent legal liabilities, the group of US retailers said individually, and now as a group, that they would propose a better, more efficient solution to improve Bangladesh's infrastructure.

Walmart outlined its own improvement plan, which included independent building inspections, fire safety training for "every worker in every factory producing for Walmart," and a $600,000 contribution to the LaborVoices project to support a "grassroots level outreach to workers" in order to open more communication channels in addition to its existing worker hotline. Gap, which sources from about 70 factories in the country, said it would continue to build upon its existing safety plan for the industry (Walmart, though, was recently discovered to have still been sourcing products from 'black-listed' factories.).

Now, Gap, Walmart and other retail brands along with the National Retail Federation have said that they are finalizing a $50 million, five-year fund to improve safety conditions in Bangladesh, which could be announced as soon as mid-July. "With a clear bar already set, the question now becomes whether the plan put forward by Walmart, Gap and others will fix the problems faster than the legally binding accord signed last month," Dara O'Rourke, professor of environmental and labor policy at the University of California at Berkeley, told the Wall Street Journal. "For a $20 billion garment industry, $50 million seems like a tiny amount to make real improvements."

The new plan for improvement can not come quickly enough for Gap and others, which have been the focus of ongoing consumer protests for their actions — or lack thereof — in Bangladesh.

Still, many suspect that the proposed fund by the US retailers is simply a write-off and one that won't actually garner any changes to the troubled garment industry infrastructure.

The Walmart and Gap alternative “cannot be called an agreement,” Scott Nova, executive director of Workers Rights Consortium, told the Washington Post. “There is nobody to enforce it, just companies and industry associations that represent these companies. For an agreement, you also need a party interested in enforcing the deal.”

With over 50 retailers signed on to the Accord, with more recently enrolling, including several Danish companies and Puma, pressure is mounting on major leaders, both within the industry and in politics, to stand beside Bangladesh and commit to improving the country's vital garment industry.

This post first appeared on Brand Channel on June 27, 2013.